Many parents still clueless about college costs

Transcript:

Jeff Benjamin [00:00:04] Hey, folks, I’m Jeff Benjamin, talking today with Ron Hazel, Vice President of Fidelity Advisors five twenty nine and individual retirement products. We’re talking about some new research they have over there at Fidelity about the cost of college and how people are managing that cost. And Ron, welcome to the show.

Ron Hazel [00:00:25] Thanks, Jeff. Thanks for having me. Pleasure to be here.

Jeff Benjamin [00:00:28] I want to start with the expectations versus reality. I know that in part of your research, you found that there seems to be a big gap there as far as what people think they’re going to need or think they’re going to have to spend in college versus the realities of the cost.

Ron Hazel [00:00:45] Let me start by saying there were really two things that jumped out to me when I reviewed this year’s study. The first is the next generation of college goers are really keeping an eye on the cost of college. In fact, four out of 10 of the high school students that we surveyed ranked college costs as the number one factor in determining how and where to pursue higher education. Now, second, and equally as as important, when we surveyed parents of these high school students, we learned that many, unfortunately, are still significantly underestimating what it’s going to cost to send their child to school. And so what’s really staggering is one in four parents actually estimate the full cost of one year in college to be five thousand dollars or less. And so, again, just just really staggering news. The good news, frankly, Jeff, for advisers is this is a great opportunity for them to really demonstrate their value in helping families not only better understand what the real cost of college are, but also help them create a plan. Right, based on their individual goals, the aspirations of the student, and making sure that ultimately families in a much better position to reach those goals.

Jeff Benjamin [00:02:05] OK. How popular are five twenty nine plans? I mean, those are they still the number one way, the best way to save for college?

Ron Hazel [00:02:13] So so first, let me answer the question by saying how important is college savings? Right. Because I think you have to start there. And prior studies have have taught us at Fidelity because we’ve asked parents, frankly, to rank their college savings on sorry. We asked families to rank their savings goals. And saving for college consistently ranks number two, right behind saving for retirement. So we know that college savings is a priority and we’re certainly seeing that in terms of popularity of 529 plans. In fact, the same study showed that almost 50 percent of the parents surveyed have opened a 529 account.

Jeff Benjamin [00:02:50] Mm hmm. OK, what are some alternatives for people who might not have saved enough or might not be as prepared for the big tuition bills? I mean, and they still want to go to college?

Ron Hazel [00:03:05] Well, listen, you know, colleges and one size fits all proposition and what we have also seen with recent legislation is that 529 plans can be used for not only college costs, but also can be used for various apprenticeship programs. Certainly, community college is an option. It’s important for families to weigh the cost of in-state tuition versus out of state tuition, public school versus private school, etc.. And again, this is where financial advisers have an opportunity, I feel, to really demonstrate their value by sitting down with families. What is their financial picture look like today? What is their willingness to perhaps take on debt, whether it’s student debt or debt in the parent’s name, and again, really helping them create a plan and not only create it, but it’s equally important that that, you know, advisors follow up with with these families. Right. Have a schedule, whether it’s quarterly or annually, to review some of these items and make sure that families are staying on track.

Jeff Benjamin [00:04:06] And finally, I want to ask you about the hearing a lot of talk these days about tuition forgiveness, tuition assistance, I’m sorry, not tuition free of this debt forgiveness, student loan debt. Do you think that that’s a factor in the way people are planning for college these days, thinking maybe they’re not going to have to pay all that money back? So why worry about the cost at this point?

Ron Hazel [00:04:32] Well, I’ll tell you what I do know, Jeff, and what I do know is that the future is certainly uncertain. And, you know, I think we all know what’s talked about today might not be talked about five years from now. So, again, if I’m an adviser, I think it’s important to sit down and really, you know, examine what is the financial outlook of the family today. Again, what are some of the aspirations? Where does the child, especially if they’re older, where do they what do they want to do? Post school, post college again, helping them ultimately create a plan that is realistic based on what we know today instead of guessing on what might be tomorrow.

Jeff Benjamin [00:05:14] OK, that’s good stuff, Ron. I don’t know if you have any kids getting ready to go to college, but if you do, they have some some serious probably five twenty nine money set aside for that. Thanks a lot for being here.

Ron Hazel [00:05:26] Thank you for having me. Pleasure.

See also: College costs can sink parents too